Keeping spirits high

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The spirits market is under pressure. Nigel Huddleston reports

With beer colder than ever, wine cracking the quality conundrum and cider pulling off an icy marketing coup, spirits are facing tough times.

Total on-trade spirits volumes were down 3% in the year to July, according to AC Nielsen figures, with the major sub-categories as flat as the Cambridgeshire fens.

But Diageo category development manager Gary Singleton argues that in the context of a market that continues to drift towards in-home consumption, things could be worse.

"Footfall is increasing for the first time in many years, but that is occurring mainly in mid- to low-tempo drinking occasions," he says. "Big, high-energy nights out have declined."

Maxxium UK marketing controller Phil McLaughlin says: "All spirits categories have been having a tough time. Vodka and US whiskey have seen some growth over the last few years, but they are getting flatter.

"Managed outlets have 18% of all spirits and are massively over-performing, particularly in US whiskey. Obviously Jack Daniel's is driving that to some extent, but Jim Beam is doing well too - it sold 24,000 cases four years ago and now it has increased to 90,000. Leased and tenanted pubs have 26% of the on-trade market, but are very flat."

McLaughlin claims that sectors such as golden rum and tequila, previously at the margins, are among the few which are showing growth, and that the general shift from dark to white spirits over the last decade or so is less clear-cut than it used to be.

"This isn't so much a 'dark versus light' spirits issue - we're starting to see growth in premium brands. For example, Plymouth gin is a premium brand that is doing very well year-on-year," he says.

"Dark spirits - traditional liqueurs, Cognac and US whiskey - are [seeing growth], but mainstream whisky is having a tough time."


Diageo confirms that premium brands are seeing some growth: for example, AC Nielsen figures show volumes of Smirnoff Black increasing by 37% and Blue by 16%, while mainstream Smirnoff brand Red is down 2%.

Singleton says: "Pubs should get behind premium spirits, which offer more margin and give the consumer a better experience."

Most spirits producers are pinning their hopes on improving the experience of drinking spirits. Other drinks categories are equally likely to tap into improvements in pub atmospheres, which leaves the battleground over what

licensees put into drinkers' glasses.

Diageo isn't alone in promoting better serves for long spirit mixes but the company has gone further by producing a special

spirit-mixer glass which it aims to put into 1,500 outlets a month.

The focus is on producing drinks with great visual and taste appeal, but the underlying message is that serving them in a particular way is good for business.

"The spirit mixer is a profitable drink, in terms of GP or cash margin, compared to

other categories," says Singleton.

Broader perspective

But Whyte & Mackay marketing director

David Brown thinks spirits companies need to widen their perspective, rather than simply focusing on the perfect serve.

Brown, who has experienced the other side of the fence in his role as commercial director for Greene King's pubs division, says: "There's room in the market for a drink somewhere between a spirit mixer and a cocktail - something with a great bar call, but which is very easy for bar staff to make during busy periods.

"If it can be made in the time it takes to pour a pint of Guinness, it's a winner."

He adds that traditional brown spirit mixes such as whisky with soda or water "haven't quite got it" as far as drinkers entering the market are concerned.

"We've got to get with the programme and try to find ways to make these products more fashionable, not in a political leader's 'I like the Arctic Monkeys' sort of way, but genuinely, because the physical product we have is great," Brown maintains.

His company has just relaunched Whyte & Mackay and Vladivar, while taking the brands back in-house from Maxxium, which he says had helped push them forward.

"It shows what a bit of elbow grease can achieve - we can grow more quickly with a dedicated team," he says.

Maxxium's McLaughlin argues that the key to better serves lies in supporting pubs to train servers in efficient production of more intricate drinks.

"We're putting more cocktail menus into mainstream outlets now. Our resident mixologists have spent a lot of time visiting multiple operators and going through serves with staff to achieve a consistent approach. There's nothing worse than a cocktail that looks and tastes appalling," he says.

While pointing to growth for its own Jim Beam, McLaughlin acknowledges that as the force for growth in US whiskey, Jack Daniel's is one of the few shining stars in the spirits constellation.

Beam Global Spirits & Wine managing director Adrian McKeon, whose portfolio includes Maker's Mark and Courvoisier from the former Alllied Domceq stable, agrees that American whiskey is one of the market's more vibrant sectors.

"Maker's Mark is the fastest-growing imported whiskey, fuelled by its appeal to a younger, less traditional whiskey audience," he says. "The on-trade is having to premiumise its offer to justify the price differential compared with take-home. If it is to occupy a third place in people's lives after home and work, the serve must be more exceptional than customers might experience at home."

McKeon highlights a potential source of newer spirits drinkers: "Opportunities exist for matching premium spirits with food - it's a trend that's just beginning".

The spirits market clearly needs infusing with that kind of enthusiastic attitude, but producers have to be ready to make their mark in a cluttered marketing niche, with beer pulling out all the stops on food, boutique cider- makers aiming in a similar direction and wine enjoying a well-established head start.

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